GAO Looks At Reverse Mortgage Marketing Flaws

Posted by Orb Staff on June 30, 2009 No Comments
Categories : Residential Mortgage

g regulators should take steps to strengthen oversight and enhance industry and consumer awareness of reverse mortgage marketing claims, the Government Accountability Office (GAO) recommends in its [link=http://www.gao.gov/new.items/d09606.pdf][u]report[/u][/link] to Congress. According to the GAO's limited review of selected marketing materials for Home Equity Conversion Mortgages (HECMs), some claims, such as reverse mortgages provide ‘lifetime income,’ are improper and in need of more stringent oversight. The GAO says it received reports from states that lenders are also inappropriately cross-selling consumers in violation of state laws governing the sale of insurance and annuities. The U.S. Department of Housing & Urban Development (HUD), which the Housing and Eocnomic Recovery Act of 2008 makes responsible for restricting inappropriate cross-selling, is still in the preliminary stages of developing regulations. Additionally, the report says HUD's internal controls do not provide assurance that counseling providers are complying with HECM counseling requirements. "GAO's undercover participation in 15 HECM counseling sessions found that while the counselors generally conveyed accurate and useful information, none of the counselors covered all of the topics required by HUD, and some overstated the length of the sessions in HUD records," a report summary says. "For example, seven of the 15 counselors did not discuss required information about alternatives to HECMs." The GAO suggests developing guidance – potentially through the Federal Financial Institutions Examination Council – to help bank examiners identify these types of marketing claims, and incorporating discussion of these claims in consumer education materials. SOURCE: Government Accountability

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